April 2011

'Development aid’ is always surrounded by questions. Some argue whether it shows results, and some worry about the way it is spent. And the imminent question is, where does it go? Well, it does have some impact. According to the latest UNESCO report ‘Financing Education in Sub-Saharan Africa’, development aid accounts for 50% of the government education budget in some countries of Africa. “Over the last decade public spending on education in Africa has increased by more than 6% each year”, says the report. However, much remains to be done to distribute it well between primary and higher education, as often requirements of the primary education system suffer. Thus, cutting aid is definitely not a smart move as explained by Liz Allcock and Jimmy Kainja in their post ‘Cutting UK aid to Malawi will hurt the poor, not the leaders’.

The UN Conference on Trade and Development (UNCTAD) has just issued its Global Investment Trends Monitor that looks at outward-bound foreign direct investment (FDI). Here’s the lead: The share of developing and transition-country FDI in global outflows increased to 28 percent in 2010, up from 15 percent in 2007, the year prior to the global financial crisis. These are historic levels, both in absolute terms and as a share of the global total of outbound FDI.

Another important snippet from UNCTAD is that a full 70 percent of developing and transition-country outward investment is destined toward other developing and transition countries—this is also known as “South-South” investment. The Monitor attributes this trend to the stronger recovery and economic condition is those destinations.

In China, rural-to-urban migration and development of the rural non-farm sector strongly modified rural household income structure since the economic reform. In the mid 2000s, almost half of total rural income in China was from non-farm activities. Whether the decline in poverty was principally due to farm income growth or due to non-farm income growth and whether the rising share of non-farm income in total rural household income was the leading cause of the sharp increase in rural inequality have been key issues of debate.

Recently I saw Masdar City for the first time. I was excited to visit since over the last few years at almost every ‘Green Cities’ Conference I attended someone mentioned Masdar. Masdar City seemed the big hope: with potential and excitement of a whole new city in the desert. After $20 Billion in infrastructure investments, 50,000 people would live in this “emissions free”, closed-system suburb of Abu Dhabi. Masdar is to be a city of the future; a living laboratory to develop new technology. Planners, engineers and financiers are rushing to get in on its development. Easily a dozen times in the last two years someone enthused over coffee or lunch. ‘You need to visit’, I was told many times.

Amira Al Hussaini, the Middle East and North Africa Editor of 'Global Voices' has a blog that is anything but silly: Silly Bahraini Girl. It was on that blog that earlier this week I found this translation from the Arabic of Colonel Gaddafi on the subject of the Internet. I am not going to comment on it. I invite you to enjoy it. It has all the makings of a classic:

"Everyone seems to agree that most, if not all, policy problems have their roots in politics. That is why you often hear that a particular policy will not be implemented because there is no “political will.” Seemingly anti-poor policies and outcomes—untargeted and costly fertilizer vouchers in Tanzania, 99 percent leakage of public health funds in Chad, 20 percent teacher absenteeism in Uganda, 25 percent unemployment in South Africa—persist. Yet these are countries where the median voter is poor. A majority doesn’t vote in favor of policies that will benefit the majority. Why?" READ MORE

"It always seemed as if Arab countries were ‘on the brink.’ It turns out that they were. And those who assured us that Arab autocracies would last for decades, if not longer, were wrong. In the wake of the Tunisian and Egyptian revolutions, academics, analysts and certainly Western policymakers must reassess their understanding of a region entering its democratic moment. What has happened since January disproves longstanding assumptions about how democracies can—and should—emerge in the Arab world. Even the neoconservatives, who seemed passionately attached to the notion of democratic revolution, told us this would be a generational struggle. Arabs were asked to be patient, and to wait. In order to move toward democracy, they would first have to build a secular middle class, reach a certain level of economic growth, and, somehow, foster a democratic culture. It was never quite explained how a democratic culture could emerge under dictatorship." READ MORE

This is the first blog post I write after revisiting China’s recent economic developments, the outlook, and policy implications as part of writing our latest China Quarterly Update. After this general overview I will in a few days write one on some interesting medium term trends on relative prices and the relative importance of external trade in China’s economy (they are also discussed in the Quarterly).

The term “normalization” has been used a lot lately in relation to the composition of growth and macroeconomic policy stance, also in China. But it is hard to avoid it. During 2010, China’s composition of growth started to “normalize”—as in look like it typically does—after the spectacular developments in 2009, when a massive government-led domestic demand surge offset a huge contraction in exports. Later in 2010, the macroeconomic policy stance also started to “normalize”. I guess many of us use the word “normalization” to describe or prescribe a macro policy stance that would be in line with the “normalized” economic outlook, as opposed to a particularly tight stance.